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March 03, 2015 at 10:05 AM
For anyone watching Berkshire Hathaway, the question looms: What happens when 84-year-old Chairman Warren Buffett is no longer around?
Vice Chairman Charlie Munger, 91, takes some time during his part of the firm’s annual letter to shareholders–the 50th annual such letter–to address “the elephant in the room.”
He asks himself “Whether abnormally good results would continue at Berkshire if Buffett were soon to depart,” and then answers:
Provided that most of the Berkshire system remains in place, the combined momentum and opportunity now present is so great that Berkshire would almost surely remain a better-than-normal company for a very long time even if (1) Buffett left tomorrow, (2) his successors were persons of only moderate ability, and (3) Berkshire never again purchased a large business.But, under this Buffett-soon-leaves assumption, his successors would not be “of only moderate ability.” For instance, Ajit Jain and Greg Abel are proven performers who would probably be under-described as “world-class.” “World-leading” would be the description I would choose. In some important ways, each is a better business executive than Buffett.
Jain, 63, who runs the reinsurance business at Berkshire (BRK.A), and Abel, 52, who is chairman and CEO of Berkshire Hathaway Energy, are widely considered the front-runners to succeed Buffett. Referring to his eventual successor, Buffett himself said Monday on CNBC’s ‘Squawk Box’ that the Berkshire board “has talked about it at every meeting for I don’t know how many years. We have a precise plan in mind.”
In his portion of the shareholder letter, Munger went on to say of the two contenders:
